Looh Keo @ Looh LIM Teng v Looh Chai Boon (WA-24NCC-657-05/2022)

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1 IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR (COMMERCIAL DIVISION) ORIGINATING SUMMONS NO: WA-24NCC-657-05 /2022 In the matter of Prospell Enterprise Sdn Bhd, Yoke Hoh Sdn Bhd, Looh Oil Refinery Sdn Bhd, Sim Lim Plantations Sdn Bhd, Galaxy Attraction Sdn Bhd and Seatex Plantations Sdn Bhd respectively And In the matter of sections 48, 55, 57, 245, 342 and 585 of the Companies Act, 2016 And In the matter of Order 7, Order 28 and Order 88, rule 2 of the Rules of Court, 2012

Schedule

Schedule 1. The Companies’ submissions [17] The Companies argue that the orders requested by the Plaintiffs in Enclosure 65 exceed the scope of the HC Order dated 28.7.2022. They claim that the HC Order does not S/N pvvR7EclEeo3mbwtz7o3g grant indefinite inspection rights, as the Plaintiffs had already used up the allotted 15 working days by 1.9.2022. [18] Additionally, the Defendants assert that the HC Order does not cover the “Back-Up Copy” of records stored in the SQL and UBS accounting systems, as it only allows inspection and copying of physical and electronic records, which were provided in Excel format. [19] They further argue that certain documents requested, like the Intracompany Amalgamation Workings and Intragroup Consolidation Workings, prepared by third-party auditors, are outside the HC Order's disclosure scope. [20] The Defendants believe that the additional directions in Enclosure 65 are unnecessary, as the HC Order has been fully complied with during the inspection period from 11.8.2022 to 1.9.2022. [21] They view the Plaintiffs' application as an attempt to gather evidence for LTT’s personal suit in Kuala Lumpur High Court Suit No: WA-22NCC-112-03-2022 (“Suit 112”), which they argue is an abuse of process and could undermine the HC Order's finality. For context, in Suit 112 LTT sought to recover shares in various companies that were registered in the names of the Directors, who are his children, which LTT claimed were held on trust for him, not gifted to them. S/N pvvR7EclEeo3mbwtz7o3g [22] The Defendants argue against expanding the orders, stating that the Excel format provided is sufficient for inspection purposes as outlined in the HC Order. The Directors’ submissions [23] The Directors submit that LCB lacks standing to seek the reliefs in Enclosure 65, having previously conceded this in Suit 112. They argue that permitting further inspections beyond the 15 days would effectively vary the HC Order into an open-ended one, contrary to its intent and the time limit the Plaintiffs themselves proposed. [24] The Directors contend the HC Order does not entitle the Plaintiffs to the SQL and UBS format Back-Up Copy or third-party auditor workings, as providing Excel format copies already complies with the HC Order. No useful purpose would be served compelling production of the misplaced Item 3 Documents which cannot be found despite genuine efforts. [25] The Plaintiffs' application is alleged to be an abuse of director's powers to fish for evidence, which should not be allowed. As the existing HC and Court of Appeal Orders contain adequate safeguards against misuse of the inspection for LTT’s personal suit, Enclosure 65 is unnecessary and should be dismissed. S/N pvvR7EclEeo3mbwtz7o3g Analysis and findings of the court Prayer 2 [26] The Plaintiffs submitted that Prayer 2 should be granted to allow further inspection of the Companies' records by the Authorised Persons for an additional 30 working days upon written notice, with liberty to apply for any further extension. They contended this was necessary and within the ambit of the HC Order to enable the LTT to fully exercise his director's right of inspection, in light of the challenges faced during the initial inspection period and the Defendants' conduct which hindered completion of the inspection. [27] The Plaintiffs highlighted the immense volume of records accumulated by the 6 Companies, 3 of which were incorporated in the 1980s/1990s, stored across multiple locations in different states. Given the 15 working day timeframe and the Court of Appeal Order limiting inspection to a maximum of 5 Authorised Persons, it was impossible to complete the task. Furthermore, the Defendants' actions frustrated the process, such as refusing to provide records in the requested electronic format, giving inconsistent information about the whereabouts of documents, and delaying provision of essential records. The Plaintiffs argued the greater injustice would befall them if further time was not granted, as the HC Order aimed to enable the LTT's exercise of inspection rights. S/N pvvR7EclEeo3mbwtz7o3g [28] The Defendants opposed Prayer 2, arguing that the HC Order did not provide for indefinite or unlimited inspection. They submitted that the 15 working day time limit proposed by the Plaintiffs themselves was already complied with between 11.8.2022 to 1.9.2022. The Defendants alleged that the Plaintiffs were attempting to abuse the LTT's powers as director to embark on a fishing expedition to gather evidence for Suit 112. They contended that allowing Prayer 2 would encourage such abuse and enable an endless renewal of inspection notices, contrary to the finality intended by the HC Order's time limit. [29] Having considered the submissions of all parties, I am of the view that Prayer 2 should be allowed, but with modifications. The starting point is the HC Order, which aimed to enable the LTT to exercise his right of inspection as a director of the Companies. It is trite that a director's right to inspect company records is wide-ranging and virtually absolute, as recognised in cases like Dato' Tan Kim Hor v Tan Chong Consolidated Sdn Bhd [2009] 2 MLJ 527 (CA) and Dato' Seri Timor Shah Rafiq v Nautilus Tug & Towage Sdn Bhd [2018] 8 MLJ 394 (HC), as well as under the Companies Act 2016. This right flows from the director's office to enable him to discharge his duties, and can only be impeded if it is clearly shown that the inspection is for an improper purpose detrimental to the company's interests. No such improper purpose has been proven here. The LTT's poor health and illiteracy also necessitates the S/N pvvR7EclEeo3mbwtz7o3g appointment of Authorised Persons to meaningfully exercise this right. [30] In construing the HC Order, the court must give effect to its manifest purpose of facilitating the LTT's inspection rights. A restrictive reading that limits inspection to a one-off exercise would render it ineffective, requiring fresh applications each time inspection is needed and straining judicial resources. The challenges described by the Plaintiffs, such as the sheer number of documents across multiple locations and the maximum 5 Authorised Persons, reasonably justify further time to complete the inspection. The Defendants' conduct, while not necessarily deliberate, has compounded the difficulties. [31] I am mindful that Prayer 2, if allowed unmodified, may open the door to an indefinite cycle of inspection notices. The HC Order's 15 working day timeframe, while not expressly barring renewal, must be read purposively. The Federal Court in Stone World Sdn Bhd v Engareh (M) Sdn Bhd [2020] 12 MLJ 237 recognised the court's inherent jurisdiction to issue consequential orders to work out earlier orders and give effect to their intent. Such orders can vary the original order if needed to provide “succour”. However, this power must be wielded judiciously to balance the competing interests at stake. S/N pvvR7EclEeo3mbwtz7o3g [32] To achieve a proportionate outcome, I allow Prayer 2 but grant the Plaintiffs one further opportunity to inspect the records for 30 working days upon written notice to the Defendants. The Authorised Persons shall comprise those already identified in the HC Order and Court of Appeal Order. Taking into account the difficulties faced in the initial inspection attempt and the scope of records involved, 30 working days is a reasonable duration to complete the inspection if planned efficiently. This strikes a balance between the LTT's legitimate right to inspect documents to discharge his duties, and the Defendants' desire for finality in litigation. If the ordered inspection is still unsatisfactory due to the Defendants' conduct, the Plaintiffs have liberty to apply for further directions, but there shall be no automatic renewal of inspection rounds. [33] In conclusion, the Plaintiffs' Prayer 2 is allowed with modifications. The Defendants shall allow the Authorised Persons a final opportunity to inspect the Companies' records, with inspection to be completed within 30 working days of written notice. Parties have liberty to apply for further directions only if necessary. Prayer 3 [34] The Plaintiffs, through Prayer 3 of Enclosure 65, sought an order allowing the Authorised Persons to take electronic copies of the Companies' records stored in the SQL and UBS accounting systems/software, in a format and file type S/N pvvR7EclEeo3mbwtz7o3g readable on another device installed with the same systems/software (described as the “Back-Up Copy”). The Plaintiffs contended this was necessary for meaningful and effective analysis of the accounting information. They submitted that the LTT, as a director and shareholder of the Companies, was entitled to the records in this format. Further, they argued the HC Order contemplated inspection and copying of records in electronic form, and the Back-Up Copy fell within its ambit. [35] The Defendants resisted Prayer 3. They submitted the HC Order did not specifically provide for taking a back-up of the accounting systems, only permitting inspection of physical and electronic records and the making of copies. They asserted that electronic copies of the requested accounting records, extracted from the SQL and UBS systems in Excel format, had already been provided to the Plaintiffs' appointed auditors, Messrs Moore Stephen Associates PLT, between 16.8.2022 to 19.8.2022. There was no complaint from the auditors about missing financial information or inability to analyse the records provided. The Defendants contended the Plaintiffs' request for the Back-Up Copy was motivated by convenience rather than necessity, which was not a valid basis to vary the HC Order. [36] Having considered the opposing submissions, I find that Prayer 3 should be allowed. The starting point, as with Prayer 2, is the proper interpretation of the HC Order in light of its manifest purpose to enable the LTT to exercise his S/N pvvR7EclEeo3mbwtz7o3g director's right of inspection. Following the reasoning in Dato' Tan Kim Hor v Tan Chong Consolidated Sdn Bhd and Dato' Seri Timor Shah Rafiq v Nautilus Tug & Towage Sdn Bhd, as well as sections 245 and 253 of the Companies Act 2016, this right extends to all company records and is not to be constrained save where an improper purpose is shown. [37] Crucially, the HC Order expressly provides for inspection of records “whether in physical or electronic form”, and for the Authorised Persons to “make copies of and/or take extracts from the Records”. A plain reading of this language suggests that where records are kept electronically, electronic copies are to be provided. The SQL and UBS Records indisputably comprise the Companies' accounting records stored in electronic form. Contrary to the Defendants' assertion, there is no requirement to show the Excel copies are inadequate before seeking the Back-Up Copy. The LTT as director is prima facie entitled to the records in the format they are held, not merely the format the Companies deem fit to disclose. [38] I accept the Plaintiffs' argument that the Back-Up Copy is necessary for meaningful analysis and not a mere convenience. SQL and UBS are specialised systems for organising and managing financial databases. Accounting information in these formats facilitates making queries and generating accounting reports. While the sample Excel records provided show some financial information, this is not the same as having access to underlying databases and S/N pvvR7EclEeo3mbwtz7o3g the functionality of the SQL and UBS software. The Plaintiffs are entitled to inspect and analyse the records with the same tools used by the Companies, not a more cumbersome facsimile. [39] I also reject the Defendants' contention that Prayer 3 is an abuse of process to embark on a fishing expedition. This argument was considered and dismissed by this court when granting the HC Order. If the records now sought were not wrongfully withheld then, it cannot be an abuse to persist in seeking what one is entitled to. The LTT's access to the Back-Up Copy is in furtherance of his right and duty as director to be fully informed of the Companies' financial position, not to gain an unfair advantage in litigation. If there are specific documents the Defendants contend are privileged or otherwise exempted from disclosure, the appropriate course is to withhold only those documents and provide a list to the Plaintiffs, not a blanket refusal. [40] In any event, the Court of Appeal Order dated 5.8.2022 granted safeguards to address the Defendants' concerns. The Authorised Persons must give an undertaking that information received will only be disclosed to the LTT. There can be no unregulated use of disclosed documents. Any use of the documents in Suit 112 is subject to either the consent of the parties or leave of court. With these safeguards in place, there is no reason to doubt the propriety of the inspection. S/N pvvR7EclEeo3mbwtz7o3g [41] For these reasons, I find that the Back-Up Copy falls squarely within the scope of the HC Order. Applying the principles in Stone World Sdn Bhd v Engareh (M) Sdn Bhd, the grant of Prayer 3 is a consequential order necessary to give full effect to the HC Order. To deny this relief would be to undermine the HC Order's purpose by allowing the Companies to unilaterally restrict the manner and extent of the LTT's access to records. The Plaintiffs have established a prima facie entitlement to the relief sought, and the Defendants have not shown any reason why it should be refused as a matter of discretion. [42] Accordingly, the Plaintiffs' Prayer 3 is allowed as prayed. Within 14 days of the date of this order, the Defendants shall provide the Authorised Persons with the SQL and UBS Records in the native formats and file types used by the SQL and UBS accounting systems/software, which are readable on another device equipped with the same systems/software, by way of an electronic storage medium. The Authorised Persons may make copies of the same, to be used solely for the purposes of the LTT's inspection as a director in accordance with the HC Order and Court of Appeal Orders. Prayer 5 [43] Prayer 5 of Enclosure 65 sought an order that the Defendants provide the documents listed in Schedule 1 to the Authorised Persons within 3 working days. The S/N pvvR7EclEeo3mbwtz7o3g documents specified were: (1) Prospell’s Intracompany Amalgamation Workings for FYE 2017 to 2021, (2) Intragroup Consolidation Workings for FYE 2017 to 2021 for Prospell and its subsidiaries, (3) all supporting documents for accounting entries of Prospell's Kuala Lumpur office for FYE 2021 (“Item 3 Documents”), and (4) electronic copies of accounting records for Prospell and its subsidiaries in the UBS and SQL accounting systems/software (Back-Up Copy). [44] The Plaintiffs submitted that Prayer 5 was consequential to the grant of Prayer 3 for the Back-Up Copy. They contended that as directors, they were entitled to access the Item 3 Documents and the workings in items (1) and (2) to understand how Prospell's financial statements were prepared. The Defendants had not disputed the existence of these documents. [45] In response, the Defendants contended that items (1) and (2) contained documents prepared by third-party auditors which did not fall within the scope of the HC Order. As for the Back-Up Copy in item (4), the Defendants reiterated their objections as set out in respect of Prayer 3. Regarding the Item 3 Documents, the Defendants explained they could not be provided as they had been misplaced. The Directors’ affidavits detailed the efforts taken to locate the Item 3 Documents, including correspondence between the Defendants' account manager Jeff Yaw and Prospell's auditors in October 2022 which revealed that while the S/N pvvR7EclEeo3mbwtz7o3g documents were returned by the auditors to Prospell's Bahau office on 27.7.2022, they could no longer be found. The Defendants exhibited records of physical searches undertaken at the Bahau office to locate the Item 3 Documents, without success. [46] On 7.3.2023 and 20.3.2023, the Plaintiffs agreed not to pursue items (1) and (2) as the Defendants provided the Amalgamation Workings for FYE 2017 to 2020 on 7.3.2023, and agreed on 20.3.2023 to supply the draft and final versions of the same for FYE 2021. [47] Concerning Prayer 5, I find that an order should be made only in respect of item (4) for the Back-Up Copy. This follows from the allowance of Prayer 3 for the reasons stated above. The Defendants shall provide the Authorised Persons with an electronic copy of the accounting records for Prospell and its subsidiaries which are stored in the UBS and SQL accounting systems/software, in the file format readable by those systems/software, within 14 days of today's order. [48] As for the Item 3 Documents in item (3), I decline to make an order in light of the evidence adduced by the Defendants demonstrating that these documents have been misplaced and cannot be found despite genuine efforts to locate them. The 7th Defendant's affidavits affirmed on 14.2.2023 and 27.3.2023 particularise the chain of events, corroborated by contemporaneous correspondence, showing that the Item 3 S/N pvvR7EclEeo3mbwtz7o3g Documents were last in the possession of Prospell's auditors for the FYE 2021 audit. The auditors returned the documents to Prospell's Bahau office on 27.7.2022, before the HC Order for inspection was granted on 28.7.2022. When the Item 3 Documents were requested by the Plaintiffs subsequently, the Defendants' account manager Jeff Yaw initially believed they were still in the Bahau office as they had been sent there in mid-2022 for audit purposes. However, upon checking with Prospell's staff Madam Yun, he was informed that they were not in the office. Jeff Yaw's correspondence with the auditors in October 2022 confirmed the documents had been returned, leading to a search of the Bahau office. Photographs were exhibited depicting the search, but the Item 3 Documents could not be located. [49] While the Plaintiffs suggested that the Item 3 Documents should nevertheless be ordered to be produced in case they are found, I am of the view that it would be inequitable to compel the Defendants to produce documents which they have proven are not in their possession or power. The Defendants have already been ordered to disclose all other relevant documents which exist. There is no evidence that the Item 3 Documents have been deliberately suppressed or destroyed. Their misplacement, while unfortunate, appears to be an honest error that occurred prior to the HC Order which could not have been motivated by any desire to avoid disclosure. Had the Item 3 Documents been available, the Defendants would have had to produce them under the S/N pvvR7EclEeo3mbwtz7o3g HC Order. That they are now missing means they cannot be disclosed, but this is not a breach of the Defendants' obligations to produce them. [50] If a document cannot be found and proper inquiries have been made to locate it, the party will have complied with its duty by disclosing that the document exists but cannot be found. The duty does not extend to recreating or obtaining fresh copies of missing documents. Adapting this principle to the present application for specific disclosure, since the Defendants have shown a valid reason for non-production of the Item 3 Documents notwithstanding a genuine attempt to locate them, it would be a futile exercise to order production in any event. If the documents are subsequently located, the Plaintiffs may seek further directions, but I will not make an anticipatory order in the abstract. [51] In the circumstances, Prayer 5 is allowed in part in respect of item (4) only. It is dismissed in respect of item (3) as the Defendants have established a reasonable excuse for non-production of the Item 3 Documents. As items (1) and (2) are no longer pursued, no order is made in respect of those. Conclusion [52] Premised on the above, I make the following orders: a) The records (as defined in Minute 1 of the High Court Order dated 28.7.2022) shall continue to be open for S/N pvvR7EclEeo3mbwtz7o3g inspection by the Authorised Person (as defined in Minute 1.1 of the High Court Order dated 28.7.2022 and amended by the Court of Appeal Orders dated 5.8.2022, and as may be further amended by further Court Orders) for a period of 30 working days, commencing from the date of a fresh written notice for inspection without any notice or extension after this period, under any circumstances, with liberty to the Plaintiffs to make any further applications; b) That the Authorised Person (as defined in Minute 1.1 of the HC Order dated 28.7.2022 and amended by the Court of Appeal Order dated 5.8.2022, and as may be further amended by further Court Orders) shall be entitled to take electronic copies of the 1st to 6th Defendants' records kept in the 1st to 6th Defendants' accounting system/software in the same file format/type, which can be read on other devices installed with the same accounting system/software; c) That the Defendants shall provide electronic copies of the accounting records of the Prospell Enterprise Sdn Bhd group of companies (consisting of Prospell Enterprise Sdn Bhd and its subsidiaries) kept in the companies' UBS and SQL Accounting System/Software in the same file format/type, which can be read on other devices installed with the UBS and SQL Accounting System/Software to the Authorised Person (as defined in Minute 1.1 of the S/N pvvR7EclEeo3mbwtz7o3g HC Order dated 28.7.2022 and amended by the Court of Appeal Order dated 5.8.2022, and as may be further amended by further Court Orders) within 3 working days from the date of this Order; d) By consent between the parties, the 7th to 11th Defendants shall forthwith and in any event, within 7 working days from the date of finalisation of the draft Prospell Enterprise Sdn Bhd Consolidation and Merger Working Papers for the financial year ended 2021 which was given to the Plaintiffs on 27.3.2023, provide to the Plaintiffs the final version of the same; e) Costs of RM6,000.00 subject to allocator fee to be paid by the 1st to 6th Defendants to the Plaintiffs; and f) Costs of RM6,000.00 subject to allocator fee to be paid by the 7th to 11th Defendants to the Plaintiffs. 21 March 2024 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) S/N pvvR7EclEeo3mbwtz7o3g Counsel: For the Plaintiffs: Karen Yong & Chong Lip Yi (Messrs Ranjit Ooi & Robert Low) For the 1st to 6th Defendants: Rishwant Singh with Chia Eng Yi (Messrs. Cecil Abraham & Partners) For the 7th to 11th Defendants: Chia Oh Sheng with Lim Jun Xian and Liew Jian Hui (PDK) (Messrs. Lee Hishamuddin Allen & Gledhill) S/N pvvR7EclEeo3mbwtz7o3g